In most states, including Texas, failure to draft a will, or failure to draft a valid will, leads to an estate passing to a decedent’s relatives under the Texas intestacy statutes. This means that if you die without a valid will, some of your loved ones may not be able to inherit anything. For unmarried partners, without a will, they are most likely unable to inherit anything from their unmarried decedents.

In 2004, famous Swedish journalist and crime writer, Stieg Larsson, passed away. After his death, his girlfriend and his surviving family members were entrenched in a probate nightmare. Currently, his estate keeps earning money from the posthumous sales of his books. Because the famous author died without a valid will, his girlfriend of 32 years is not entitled to any of his estate. Instead, his entire estate passed to his surviving brother and father under Sweden’s intestacy laws.

Famous for his “Millennium Series” of suspense novels, the famous Swedish author, Stieg Larsson, died of a heart attack at the young age of 50 after making his way up multiple flights of stairs to his office. His books were bestsellers, and they sold millions of copies internationally. Winner of almost a dozen writing awards, USA Today made him their “Author of the Year” posthumously in 2010. Stieg Larsson became the first author to hit the 1 million e-book sales mark on Amazon.com. At the time of his death, experts estimated his net worth at $25 million.

The Mendel Law Firm, L.P. is a member of the American Academy of Estate Planning Attorneys.

Unlike children of parents who received disability benefits through the Supplemental Security Income (SSI) program, children of Social Security Disability Insurance (SSDI) benefits’ recipients may be able to receive survivors’ benefits. Although the U.S. Social Security Administration administers both programs, the SSDI program allows some surviving family members to receive survivors’ benefits.

According to federal law, the Social Security Administration may pay SSDI benefits to dependent family members of SSDI recipients. Generally, survivors’ benefits are available to children and surviving spouses caring for a recipient’s children if the recipient worked for at least 1.5 years before death. Furthermore, in addition to dependency benefits for survivors of SSDI recipients, widows and widowers, unmarried children and dependent parents of recipients may qualify for survivors’ benefits based on the deceased recipient’s work history. The federal SSDI survivorship benefit rules vary by degree of kinship, age and marital status. For instance, surviving dependent parents of SSDI recipients may receive survivors’ benefits if they are at least 62 years old and are qualified dependents. Qualified dependent-parents must prove they relied on a recipient’s support for at least 50 percent of their daily living expenses.

The amount of benefits that qualified survivors may receive will depend on a recipient’s lifetime earnings. Generally, the more a recipient earned, the larger the survivorship payment. The Social Security Administration also provides one-time payouts of $255 in some cases to survivors of SSDI recipients.

The Mendel Law Firm, L.P. is a member of the American Academy of Estate Planning Attorneys.

State laws vary regarding posthumously conceived or pretermitted children. Many states refer to these children as after-born children or unintentionally omitted children. A pretermitted or posthumously conceived child is one that was born after a parent drafted their Will. In many states, these children receive the same inheritance rights as their siblings born after their parents drafted their Wills.

Technically speaking, a posthumously conceived child typically refers to those children conceived after the death of their parents. In most cases, these children were born from embryos frozen while their parents were alive. “Embryo cryopreservation” is the medical term for children born from frozen embryos. Currently, there is very little case or statutory law regarding the rights of posthumously conceived children. A posthumously conceived child is one in which a parent’s egg was fertilized with a parent’s sperm after one parent died. There is a difference between a posthumously conceived child and a posthumously born child. A posthumously born child is one in which parents conceived the child while they were still alive.

Many legal scholars believe that posthumously conceived children should have the same inheritance rights as posthumously born children. In a novel appellate case, the Ninth Circuit Court of Appeals considered a posthumously conceived child’s inheritance rights when the child’s father died of cancer after freezing his sperm. His wife used his sperm after his death and successfully conceived twins. The Ninth Circuit Court of Appeals held that a posthumously conceived child has the same inheritance rights as a posthumously born child.

The Mendel Law Firm, L.P. is a member of the American Academy of Estate Planning Attorneys.

The Internal Revenue Service (IRS) does not require you to declare your gifts or inheritances that you received during the tax year on your Federal income tax returns unless you fall within a few exceptions. In most cases, as the recipient of a gift or inheritance, you do not have to pay income taxes on those gifts. Instead, the donor of the gift pays income taxes if his gift exceeds the annual threshold. For the 2011 tax year, the annual gift limit is $13,000 per recipient. Thus, a donor does not have to pay income taxes if his gift per recipient is up to $13,000. However, if you receive a foreign gift, you may have to report it on IRS Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts. It is important to understand your responsibilities as a U.S. resident receiving a foreign gift.

Note that the federal tax law is not an income tax paying requirement; it is a reporting requirement. This means that your legal obligation as a U.S. resident is to report it in some cases (depending on the dollar amount and type of gift donor). Under the Internal Revenue Code, the IRS does not require you to pay federal income taxes on your foreign gifts. It is also important to understand the IRS’ definition of a “foreign gift.” A foreign gift is a gift of property or money received from a foreign individual or entity by a U.S. resident.

The Mendel Law Firm, L.P. is a member of the American Academy of Estate Planning Attorneys.

In 2010, Texas made news headlines for making its first posthumous exoneration of an inmate wrongfully imprisoned. In 1985, Tim Cole was convicted of raping a fellow classmate at Texas Tech University while he was attending as an Army veteran.

Cole maintained his innocence for the next 14 years. In 1999, he died in prison from asthma complications at the young age of 39. In 2008, a DNA test cleared Cole of the 1985 rape. Two years later, Texas Governor Rick Perry posthumously officially pardoned Tim Cole of the rape. Because of the controversy surrounding this case, Texas passed the Timothy Cole Act which allows victims to receive large monetary lawsuits for their wrongful imprisonments. The state paid his surviving family members over $1 million. To stake his claim, Timothy Cole’s estranged father appeared out of the woodworks for his portion of the inheritance. As far as we know, Kennard Cole, Tim Cole’s father, never had any personal relationship with his son. In fact, his name is not on his son’s birth certificate. A Texas judge ordered the Tim Cole’s surviving parents to split his wrongful imprisonment settlement between them, even though his father was never involved in the inmate’s life. Tim Cole’s mother has stated that she plans to sue him for years of unpaid child support based on this unfair decision. Hopefully, the state will prohibit his father from inheriting his late son’s legacy.

The Mendel Law Firm, L.P. is a member of the American Academy of Estate Planning Attorneys.

Accountants and tax attorneys know some of the best ways to reduce your tax liabilities while you are still living. However, estate planning attorneys may help you simultaneously reduce your tax liabilities while you are still living and after your death. According to the federal Internal Revenue Code, the Internal Revenue Service allows you to make gifts of up to $13,000 without having you pay taxes on those gifts. Furthermore, your recipients will not have to pay federal income taxes on the value of their gifts as long as they do not exceed the federal annual limits. By making gifts while you are still living, you can simultaneously reduce your estate taxes. This means that your heirs can keep more of their inheritances.

As of 2012, each taxpayer can make a lifetime gift of up to $13,000 annually to each recipient. Through the end of 2012, you can also give a lifetime gift of up to $5 million. This $5 million exclusion is in addition to your $13,000 annual tax-free gift allowance to each recipient. By giving your loved ones gifts annually, you can avoid having to pay estate taxes in many cases. Thus, if you would like to help your beloved niece while you are still living, you can give her a cash gift of up to $13,000 each year while you are still living. If you wanted to add your beloved nephew to the list of gift recipients, you can also give him a gift of up to $13,000. The tax laws are subject to change annually so speak with your attorney or accountant about the intricacies of the federal gift tax laws.

The Mendel Law Firm, L.P. is a member of the American Academy of Estate Planning Attorneys.

A power of attorney is a legal document that creates a special kind of relationship between you and someone else, called a principal-agent relationship. Through your power of attorney you grant someone—your agent—specific legal authorities to act on your behalf. This person’s role can be as limited or as broad as you decide, but you should always carefully consider the issue of payment before you choose to appoint an agent, also known as an attorney-in-fact. There is no legal requirement that you pay an agent, but your agent should be someone you can rely on and providing payment may make it easier for a potential agent to accept the position.

Salary: When you’re appointing an agent the question of pay often hinges on the extent of the agent’s actions and his or her relation to you. If, for example, you appoint an attorney to manage your finances if you get sick, payment is typically required or the attorney will not accept the position. On the other hand, if you appoint your spouse as your power of attorney for health care decisions, a salary is typically not required. Either way, you should make it clear in your power of attorney document what, if any, payment the agent will receive.

Expenses: In general, agents have the right to be compensated for any out-of-pocket expenses they incur as they perform their duties. However, an agent has specific duties when it comes to handling a principal’s finances, and you should check with an attorney before giving yourself any payments.

The Mendel Law Firm, L.P. is a member of the American Academy of Estate Planning Attorneys.

Another important consideration with life insurance beneficiary designations concerns spouses are not required to carry life insurance policies as part of their divorce settlement agreements but fail to substitute beneficiaries. For example, imagine Husband and Wife divorce in 2010. Following the divorce, Husband forgets to name a different beneficiary in his life insurance policy. Under Texas law, if Husband forgets to change his life insurance beneficiary designation, his former wife probably doesn’t have a right to his benefits upon his death. Instead, his life insurance benefits would go to an alternate beneficiary. If Husband did not name an alternate, the insurance carrier typically pays the benefits to his estate. If he dies without a will, then his benefits are payable to his intestate heirs according to the state laws of intestate succession. If he dies with a will, his benefits are payable to his surviving heirs named in his will. It is important to make changes to your estate planning documents, your life insurance policies and your retirement policies to avoid these issues following divorce.

The Mendel Law Firm, L.P. is a member of the American Academy of Estate Planning Attorneys.

In Texas, divorcing couples should consider how their divorce settlement agreements may affect their future estate planning rights. Family laws and probate laws overlap in many situations. In Texas, a surviving spouse has a right to certain community property and non-community property, including a homestead right to a life estate. If a divorce property settlement agreement contemplates otherwise, does a former spouse with a life estate right still have the legal right to live in the former spouse’s home? In most cases, the answer is “no.” Divorce typically extinguishes the rights that husbands and wives have to one another’s property after death. Because of the life changes that divorce brings, changing your estate planning documents is an important part of the divorce process. Speaking with an estate planning attorney about your divorce is a very smart decision and may help you save unnecessary time and frustration.

The Mendel Law Firm, L.P. is a member of the American Academy of Estate Planning Attorneys.

Another important consideration with life insurance beneficiary designations concerns spouses who are not required to carry life insurance policies as part of their divorce settlement agreements but fail to substitute beneficiaries. For example, imagine husband and wife divorce in 2010. Following the divorce, husband forgets to name a different beneficiary in his life insurance policy. Under Texas law, if Husband forgets to change his life insurance beneficiary designation, his former wife probably doesn’t have a right to his benefits upon his death. Instead, his life insurance benefits would go to an alternate beneficiary. If Husband did not name an alternate, the insurance carrier typically pays the benefits to his estate. If he dies without a will, then his benefits are payable to his intestate heirs according to the state laws of intestate succession. If he dies with a will, his benefits are payable to his surviving heirs named in his will. It is important to make changes to your estate planning documents, your life insurance policies and your retirement policies to avoid these issues following divorce.

The Mendel Law Firm, L.P. is a member of the American Academy of Estate Planning Attorneys.